Centralization, the leverage to obtain better quality

Hospitals have to manage with less financial means, want to or have to meet increasingly high-quality requirements and need new technologies as well as new organisation models to remain financially cost-effective.

Sébastien Van Hoof

The healthcare industry is a rapidly changing dynamic industry, which is continually seeking to become even more professional in its support processes by organising them more efficiently in order to offer an appropriate response to ever-increasing financial pressure. Hospitals have to manage with less financial means, want to or have to meet increasingly high-quality requirements and need new technologies as well as new organisation models to remain financially cost-effective.

My blog tells you about this principle for centralisation in the healthcare industry and how centralisation will have a positive effect on obtaining higher quality due to pooling substantial investments in new technologies. The economy of scale thus created will enable hospitals which formerly did not have the means to have access to these new technologies, and therefore improve their quality and comply with new regulations which are more and more demanding (see above). And this is exactly where centralisation, as well as a logistics platform, can act as a lever and enable institutions to raise the service level while retaining the best possible cost structure.

In addition, centralisation makes it possible to concentrate the necessary expertise for organisation and management of processes at an “industry” level (such as for example stock management). This expertise, from the industry, is not always present in hospitals which focus more on their core business, which does not include support services. This is also one of the objectives of centralisation, namely to reinforce expertise in order to implement “state-of-the-art” processes.

Pharmacy (distribution)

A hospital pharmacy’s activities can be divided into two very different categories: on one hand the “core business” activity, namely the clinical aspect of a pharmacy with all the support given to the medical professionals and medical staff for the correct use of drugs and, on the other hand, a logistics aspect which still plays an important role (ordering, reception, checking, storing, carrying out distribution of drugs). A logistics platform makes it possible to set up robot systems supporting the logistics process to be able, at the end of the circuit, to deliver drugs in unit doses and aggregated by patient with a view to this reducing the risk of error while improving the process of drug administration. Robotisation also simplifies achieving the objectives set by JCI or NIAZ: improving the process for administration of the correct drug, at the correct dose to the correct patient and enabling errors and faulty administrations to be avoided. Robotisation also enables the hospital pharmacist to refocus on his core activities, clinical pharmacy, due to the time freed up from the logistical point of view.

Pharmacy (preparations)

In addition to distributing drugs, the hospital pharmacy also deals with pharmaceutical preparations. In this area as well, major changes have taken place over the last few years, both legislative and technical. For example, let’s look at the predicted introduction of the famous PICS standards by the State which compel hospital pharmacists to carry out their preparation in a controlled environment (clean rooms). The procedures planned for this are time-consuming and the infrastructure costs are particularly high.

In 2015 Möbius was appointed by the Ministerial Office of Public Health to carry out a study on the financial impact of implementing the various PICS standards and analysing in what way centralisation could provide solutions. This study was conducted in close collaboration with 5 pilot hospitals and showed that centralisation was necessary since the investments, separately, were untenable without revised funding from the State.

Sterilisation

Currently, central sterilisation units are generally considered as support services because the members of staff work depending on and at the request of the operating theatres. As the sterilisation units have no direct value added for the patient, they find themselves one of the first services where savings are envisaged when budgets have to be cut-back. Yet a sterilisation unit is crucial in the quality of surgical operations and is therefore of tremendous value for the hospital. Sterilisation of instruments is by nature a typically industrial process with high-quality requirements, but it is not always considered or organised as such in many hospitals, which leads to losses and at times poor quality.

Due to centralisation and combining volumes, economies of scale can be made because the staff and equipment are not increased in the same proportion. So the means released enable investing in state-of-the-art equipment, and increasing the quality and traceability of the instruments. In this way, staff dedicated to sterilisation can work in a high-tech and rewarding environment, which increases the staff’s professionalism.

Store

Finally, centralising traditional stores (sterile and non-sterile equipment) will also enable gains on a number of levels. In hospitals, huge amounts are tied up in stocks of medical equipment and drugs held centrally and decentralised with a risk of loss or expiry of these products. In addition, due to the lack of standardisation within hospitals, it is frequently noticed that the number of items and suppliers are often higher than necessary if a rational approach is recommended. This creates, if different hospitals are looked at, a wide range of equipment, which represents a considerable amount of dormant money. In a case of centralisation, these two aspects constitute a real opportunity for decreasing volumes by harmonising sterile and non-sterile equipment, by a decrease in stock levels due to efficient management. We add to this the possibilities offered by automation (made possible by larger volumes with a limited number of SKU). By doing so, the hospital store will be raised to the level of an industrial store.

So what are the common points across all these flows? You will have understood, centralisation which acts as leverage in each one of the cases for better quality due to setting up a long-term collaboration between the hospitals. The conditions for success of this undertaking are:

Ensuring a lasting relationship between the various players who are all pursuing the same objective;

Ensuring there is a critical mass which enables obtaining economies of scale;

Ensuring that the authorities support the initiative;

Providing clear service rates and setting up a transparent financial model during implementation, this being in order to guarantee a platform – participating hospitals relationship which is as fluid as can be (based on measuring indicators).

The economies of scale obtained by centralization and combining the different flows are considerably higher that the transport costs between the hospitals and the platform.

Provided that the public authorities agree to make legislation less burdensome…

The benefits stated opposite are financially interesting and realisable, but not straight away due to current legislation in effect and the Belgian legislative framework. To make centralisation and collaboration between the different hospitals possible, regulations would in effect have to undergo serious change. Below you will find a list of a few elements of a legal nature which, for the time being, complicate setting up such platforms:

A logistics platform that is part of a hospital network has to comply with the same requirements as those to which an industrial supplier is subject. With the following consequences:

To be able to purchase drugs on account of a hospital, the platform must have a distribution authorisation (standard GDP), which amounts to saying that the platform has wholesaler status and that it must apply fixed prices, which is not acceptable for the hospitals (this is a major problem for drugs).

A complete and systematic check of goods both on delivery to the platform and at the hospital, which means an inefficient way of working (double checking).

The obligation for the platform to have a preparation authorisation (standard GMP) to be authorised to do pharmaceutical preparations and to split the drugs into unit doses, which leads to unnecessary costs.

The restriction associated with decentralisation of drug distribution: the pharmacy, and not the nurse, remains responsible for drug distribution up to service level, which makes the use of decentralised distribution robots problematical.

Central sterilisation: the current standards state that hospitals must at all times be able to have “limited” central sterilisation available (with autoclave), which means duplication of equipment and maintenance.

There is a need for VAT exemption for invoicing services from a platform to the hospital.

Lastly the creation of a logistics platform requires harmonisation of the staff regulations since, at least on start-up of the platform, healthcare institution staff will be called on. Work regulations and conditions will therefore have to be harmonised.

In conclusion, we can say that quality will increase if all the players involved are focused on the same aims. Managements and staff are the driving force for this development which without doubt must be supported by a major change in the legal framework.